This is actually fantastic, I have been having trouble evaluating net income from a lot of companies. But when I see their operating income just increase smoothly this will help me evaluate it better.
The QoQ volatility in net income is a much smaller problem than the mega volatility created if you never update the value of investments and then you have an absolutely ginormous profit or loss in just the single quarter you sell the investment. The best system could be a rolling average of the value of the investment over the past year or so to smooth out market fluctuations.
Another great video. This is hugely helpful information to investors. And often things they would overlook, like the unrealised gains counted as GAAP NI. Thanks Brian
Great content. But it is not improved by speaking so fast. I know you have heard it before, if you speak more slowly it will be better. I slow you down in the settings.
Fantastic! You could also add to the legal manipulation practices the choice a company to report costs on first in - first out or last in - first out. This would manipulate even the gross margins that you so much focus on your videos. Another legal manipulation is bringing in the USA profits from abroad from different years. One more manipulation can be reporting the cost of production when a product is assembled in several countries and with this practice companies can chose to realise profits in countries where usually taxes are lower. It is mostly companies with physical products that use these practices, or at least these examples I've learned about. Eventually the truth about the companies profitability will be exposed if looked at a period of five - six years, so only looking at one or two years can be misleading. I am not an accountant I was really surprised by all this creative practices that exist that makes evaluating business so difficult. Keep on producing these great videos. Also, thanks for listening and skipping the music.
I think the best way to value businesses is the FCF as this is the best way to see the distributable earnings. If the business is heavily investing in CAPEX then OCF is the best metric while only for financial businesses Operating Income is.
@@BrianFeroldiYT I would be careful with that, as a business that pays a substantial sum in stock-based compensation would have much more FCF, but SBC is a real expense to shareholders. The business as an entity doesn't care as much about how many people own it.
Thanks for watching! Grab a free PDF of Buffett's financial rules of thumb here: longtermmindset.co/buffett
This is actually fantastic, I have been having trouble evaluating net income from a lot of companies. But when I see their operating income just increase smoothly this will help me evaluate it better.
Glad it was useful!
So FCF is now most definitely more👑 then ever. Thx for updating us Brian! The overlords keep muddying the waters for us little investors.
Thats a good takeaway
The QoQ volatility in net income is a much smaller problem than the mega volatility created if you never update the value of investments and then you have an absolutely ginormous profit or loss in just the single quarter you sell the investment.
The best system could be a rolling average of the value of the investment over the past year or so to smooth out market fluctuations.
I was a Corporate Banker for 35 years, engaged in Credit Risk analysis. Yes, FCF makes lot of sense. After all, Cash is the King!
Agreed!
Thank you Brian for educating us on net earnings.
My pleasure!
Another great video. This is hugely helpful information to investors. And often things they would overlook, like the unrealised gains counted as GAAP NI. Thanks Brian
I did not know about this change. Interesting. That is definitely something to track.
Glad it was useful
Really love your videos! Outstanding!
Glad you like them!
Great content. But it is not improved by speaking so fast. I know you have heard it before, if you speak more slowly it will be better. I slow you down in the settings.
Feedback like this is always appreciated
you can use a playback option to slow down the video
Fantastic! You could also add to the legal manipulation practices the choice a company to report costs on first in - first out or last in - first out. This would manipulate even the gross margins that you so much focus on your videos. Another legal manipulation is bringing in the USA profits from abroad from different years. One more manipulation can be reporting the cost of production when a product is assembled in several countries and with this practice companies can chose to realise profits in countries where usually taxes are lower. It is mostly companies with physical products that use these practices, or at least these examples I've learned about. Eventually the truth about the companies profitability will be exposed if looked at a period of five - six years, so only looking at one or two years can be misleading. I am not an accountant I was really surprised by all this creative practices that exist that makes evaluating business so difficult. Keep on producing these great videos. Also, thanks for listening and skipping the music.
Excellent color!
great video, subscribing
Welcome!
I think the best way to value businesses is the FCF as this is the best way to see the distributable earnings. If the business is heavily investing in CAPEX then OCF is the best metric while only for financial businesses Operating Income is.
FCF > Net Income
@@BrianFeroldiYT I would be careful with that, as a business that pays a substantial sum in stock-based compensation would have much more FCF, but SBC is a real expense to shareholders. The business as an entity doesn't care as much about how many people own it.
The greatest invention would be thinking outside the circle❤❤🎉🎉a good start would be by feeling
Yes pls more videos like this
Will do!
Very insightful!!
Glad you liked it!
Absolutely fantastic video! Very appreciated!
Glad it was helpful!
Excellent video!
Thanks
thank you 🤝
Welcome 👍
Thank you for this amazing video. Learning a lot from your videos every week
My pleasure!
So EBITDA is more meaningful than EBIT because non cash expenses like unrealized gains/losses aren’t taken into account?
My preferences is just to always look at free cash flow